SMITH, BELL & COMPANY (LTD.

), v JOAQUIN NATIVIDAD 40 PHIL 136

Facts:
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the
Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a motor
vessel known as the Bato built for it in the Philippine Islands in 1916, of more than fifteen tons
gross The Bato was brought to Cebu in the present year for the purpose of transporting
plaintiff's merchandise between ports in the Islands. Application (Certificate of Philippine
Regitry) was made at Cebu, the home port of the vessel, to the Collector of Customs for a
certificate of Philippine registry. The Collector refused to issue the certificate, giving as his
reason that all the stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United
States or of the Philippine Islands under Act No. 2761 which provides:
SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic
ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be issued
for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the taking of the
certificate of Philippine register shall be optional with the owner.
SEC. 1176. Investigation into character of vessel. No application for a certificate of
Philippine register shall be approved until the collector of customs is satisfied from an
inspection of the vessel that it is engaged or destined to be engaged in legitimate trade
and that it is of domestic ownership as such ownership is defined in section eleven hundred
and seventy-two of this Code.
Counsel says that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of
the laws because it, in effect, prohibits the corporation from owning vessels, and because
classification of corporations based on the citizenship of one or more of their stockholders is
capricious, and that Act No. 2761 deprives the corporation of its properly without due process of
law because by the passage of the law company was automatically deprived of every beneficial
attribute of ownership in the Bato and left with the naked title to a boat it could not use.
Issue: Whether the legislature through Act no. 2761 can deny registry of vessel with foreign
stockholders.
Ruling: Yes. We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation having
alien stockholders, is entitled to the protection afforded by the due-process of law and
equal protection of the laws clause of the Philippine Bill of Rights, nevertheless, Act No.
2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co.
Ltd., the right to register vessels in the Philippines coastwise trade, does not belong to
that vicious species of class legislation which must always be condemned, but does fall
within authorized exceptions, notably, within the purview of the police power, and so
does not offend against the constitutional provision.
The guaranties of the Fourteenth Amendment and so of the first paragraph of the
Philippine Bill of Rights, are universal in their application to all person within the territorial
jurisdiction, without regard to any differences of race, color, or nationality. The word "person"

includes aliens. Private corporations, likewise, are "persons" within the scope of the guaranties
in so far as their property is concerned. Classification with the end in view of providing
diversity of treatment may be made among corporations, but must be based upon some
reasonable ground and not be a mere arbitrary selection.
A literal application of general principles to the facts before us would, of course, cause
the inevitable deduction that Act No. 2761 is unconstitutional by reason of its denial to a
corporation, some of whole members are foreigners, of the equal protection of the laws.
To justify that portion of Act no. 2761 which permits corporations or companies to obtain
a certificate of Philippine registry only on condition that they be composed wholly of citizens of
the Philippine Islands or of the United States or both, as not infringing Philippine Organic Law, it
must be done under some one of the exceptions.
One of the exceptions to the general rule, most persistent and far reaching in influence
is, broad and comprehensive as it is, nor any other amendment, "was designed to interfere with
the power of the State, sometimes termed its `police power,' to prescribe regulations to
promote the health, peace, morals, education, and good order of the people, and legislate so as
to increase the industries of the State, develop its resources and add to its wealth and
prosperity. From the very necessities of society, legislation of a special character, having these
objects in view, must often be had in certain districts. This is the same police power which the
United States Supreme Court say "extends to so dealing with the conditions which exist in the
state as to bring out of them the greatest welfare in of its people." For quite similar reasons,
none of the provision of the Philippine Organic Law could could have had the effect of denying
to the Government of the Philippine Islands, acting through its Legislature, the right to exercise
that most essential, insistent, and illimitable of powers, the sovereign police power, in the
promotion of the general welfare and the public interest.
Without any subterfuge, the apparent purpose of the Philippine Legislature is seen to be
to enact an anti-alien shipping act. The ultimate purpose of the Legislature is to encourage
Philippine ship-building.